Gold slides over 2pc on strong dollar in light liquidity trade

Gold dropped more than two per cent on Tuesday, as holidays in major markets hit liquidity, while easing geopolitical tensions and a stronger dollar added to the pressure.

Spot gold dropped 1.9pc to $4,898.53 per ounce by 06:22 GMT, after hitting $4,862 per ounce earlier, its lowest in more than a week. US gold futures for April delivery lost 2.6pc to $4,917.70 per ounce.

“Thin liquidity with the holidays in the last 24 hours, especially in China and Asia, but also obviously in the United States too, means we just lacked a bid in the market,” said Kyle Rodda, senior market analyst at Capital.com.

Mainland Chinese, Hong Kong, Singapore, Taiwan, and South Korea markets are closed for the Lunar New Year holidays. US markets were shut on Monday for Presidents’ Day.

The US dollar index rose 0.2pc against a basket of currencies, making greenback-priced bullion more expensive for holders of other currencies.

The minutes of the Federal Reserve’s January meeting, due Wednesday, could give investors further clues about monetary policy. The market currently expects the first of three interest rate cuts for the year to be in June, according to CME’s FedWatch Tool.

“Now it’s going to be interesting to see what these Federal Open Market Committee (FOMC) minutes say in the sense that the markets want many more rate cuts now than what the Fed said that it would do,” said Ilya Spivak, head of global macro at Tastylive.

Non-yielding bullion tends to do well in low-interest-rate environments.

On the geopolitical front, US President Donald Trump said Monday he would be “indirectly” involved in US–Iran nuclear talks in Geneva on Tuesday, while Ukrainian and Russian representatives will also meet there this week for US-mediated peace discussions.

“The immediate range top (for gold) is somewhere around $5,120, but the next real kind of objective here is back to the highs at $5,600 or so, and then of course, we march to record highs,” Spivak said.

Spot silver fell 2.8pc to $74.46 per ounce, after dropping over 5pc earlier.

Spot platinum dropped 2pc to $2,000.27 per ounce, while palladium lost 2.4pc to $1,682.23.

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